ROLE OF WIND POWER IN SAs ECONOMIC RECOVERY PLAN Speakers - - PowerPoint PPT Presentation

ROLE OF WIND POWER IN SA’s ECONOMIC RECOVERY PLAN

Ntombifuthi Ntuli CEO: South African Wind Energy Association (SAWEA) Emerson Clarke Director of Growth and Partnerships: Global Wind Energy Council Grové Steyn Managing Director: Meridian Economics Marubini Raphulu CEO: Hulisani Limited

• Dr. Tobias Bischof-Niemz

Head of Department Business Development: ENERTRAG

Speakers

• Introduction
• Ntombifuthi Ntuli - Welcome on behalf of SAWEA
• Speaker session: Emerson Clarke
• Speaker session: Grové Steyn
• Polling Questions
• Speaker session: Marubini Raphulu
• Speaker session: Dr. Tobias Bischof-Niemz
• Q&A hosted by Ntombifuthi Ntuli

Agenda

Ntombifuthi Ntuli

CEO: South Africa Wind Energy Association

Emerson Clarke

Director of Growth and Partnerships: Global Wind Energy Council

The e Ch Challen llenge e

The ongo ngoing ing CO COVI VID-19 c cri risi sis s th threate tens s to to

• vershado

hadow the c clim limat ate emerge genc ncy.

• The global energy transition requires vast scaling-up of new installations, and critical factors around the enabling environment for

wind power and other forms of renewable energy are yet to be resolved.

• At least 69 GW of wind power projects are at risk of being delayed and abandoned by 2024.

Wind ind ene nergy gy ne needs ds a a unif unifie ied d voic ice in in the glo global de bal debat bate abo about ut gr green n recovery.

• Over US$10 trillion in economic relief and fiscal stimulus packages are currently being evaluated by governments around the

world.

• We have a window to act to advocate for what the wind industry needs to deliver

the transition, as a key part of a renewed, decarbonised energy infrastructure

• How d

do w we t turn p rn public ic cons nsens nsus int nto g glo lobal l action? n?

The Fun undam damenta tal Que l Questio tion

The public agrees on how the future should look:

• Polls show that, globally, 71% a

agree ee that the climate crisis is as serious as the pandemic.

• Globally 65%, a

and a a m majority i in ev ever ery countr try, want a green economic recovery.

10 20 30 40 50 60 70 80

2019 2020 Q1 2020 Q2 (post COVID) 2021 Q1 2021 Q2 (post COVID) 2022 Q1 2022 Q2 (post COVID) 2023 Q1 2023 Q2 (post COVID) 2024 Q1 2024 Q2 (post COVID)

Onshore Offshore Glob

• bal W

Wind M Market Ou t Outl tlook

• ok, pre C

COVID (Q1 (Q1 2 2020) ) vs

• vs. pos
• st C

t COVID (Q2 (Q2 2 2020) )

GW GW

59.8 6.1 62.6 54.2

71. 71.6

69.9 9.0 7.9 12.7 53.5 15.0 58.4

60. 60.3 76. 76.1 66. 66.2 73. 73.4 GWEC’s Market Outlook represents the industry perspective for the expected installations of new capacity for the next five

• years. The outlook is based on input from regional wind associations, governmental targets, available project information and

input from industry experts and GWEC members. Source: GWEC Market Intelligence, June 2020 67. 67.7

6.2 57.2 6.6

63. 63.8

67.8 59.2 53.5 58.4 9.0 7.6 12.2 13.7

76. 76.7 66. 66.8 65. 65.7 72. 72.1

2020 was on-track to be a record year in global wind history with more than 76 76 G GW to be installed. However, the CO COVID- 19 c cris isis is, which disrupted global wind supply chains and project construction execution, is expected to brin ing d down

• wn

global new installation to 63 63.8 G 8 GW this year, 16 16% lower than our pre-COVID forecast made in Q1 2020. However, new installations are likely to bounce back next year and make 2021 21 a a rec ecord y d year ear with annual installation reaching 76. 6.7 G 7 GW.

Post-COVID

CO COVID ID-19 9 is is expected to bring ring d down n glo lobal ne l new w wind nd ins nstalla latio ion n by 16% 6% i 2020, but th t the ma e market et is s likel ely to to bounce e back in 2 2021

50,7 60,4 76,1 71,6 67,7 66,2 73,4 2018 2019 2020e 2021e 2022e 2023e 2024e

Global bal o

• nshore an

and d offshore wind po d power n new instal allat ations, 2018-2024e GW

+19% 19%

Pre-COVID-19 Forecast: 355 GW of new onshore/offshore installations over the next five years

“Ba “Basel eline” S e” Scen cenari rio Capitalising on 19% year-on- year growth in 2019, wind industry was on-track for a record year of 76.1 GW new installations in 2020:

• Growth concentrated in

China, Europe and the US

• Market-based mechanisms,

such as auctions, tenders and Green Certificates, driving volume

Source: GWEC Market Intelligence

Why Actio y Action is is Ne Needed: : Baseline Growth

20% of scheduled capacity abandoned and cumulative new installations decline to 285 285.7 G GW in “Do Nothing” scenario

Why A y Acti ction i is Ne Neede ded: d: Volume at Risk

50,7 60,4 76,1 71,6 67,7 66,2 73,4 62,9 67,7 52,2 51,5 51,2 2018 2019 2020e 2021e 2022e 2023e 2024e

Global bal o

• nshore an

and d offshore wind po d power n new instal allat ations, 2018-2024e GW Pre-COVID-19 Forecast: 355 GW of new onshore/offshore installations over the next five years

“Do N Noth thing” g” S Scenar ario 69 69.3 3 GW W downgrade due to projects failing to close financing and recessionary impact, including:

• Lack of extensions for project

commissioning deadlines (e.g. China and the US)

• Lack of extensions for Feed-in-Tariffs

(e.g. Vietnam)

• Heightened investment risk around

currency, counterparties, credit lines and other areas (e.g. Australia, India, Brazil, Mexico and other emerging markets in Latin America and Africa)

Source: GWEC Market Intelligence We note that this analysis is as of mid-April 2020 and does not account for a market-by-market assessment. CA CAGR

• 4%

4%

Wh Why A y Acti ction is s Ne Neede ded: d: Green Recovery

“G “Green een R Reco ecover very” ” Scen cenari rio 94. 4.9 9 GW W upside, at minimum, to achieve climate-resilient growth:

• States extend deadlines for project

commissioning/FITs

• All delayed installations in 2020

come online 2021-2022

• Higher capacity targets for RE and

improvements to the enabling environment increase the project pipeline

• Paired with widescale electrification

measures

• Aligned with IPCC stipulations to

maintain a 1.5°C pathway

50,7 60,4 76,1 71,6 67,7 66,2 73,4 62,9 83,9 95 100 1 10 2018 2019 2020e 2021e 2022e 2023e 2024e

Global bal o

• nshore an

and d offshore wind po d power n new instal allat ations, 2018-2024e GW Pre-COVID-19 Forecast: 355 GW of new onshore/offshore installations over the next five years 27% increase in capacity to at least 449.9 G GW W cumulative new installations in “Global Transition” scenario

CA CAGR +12% 12%

Source: GWEC Market Intelligence

• Spe

Spending g by by w wind e d energy gy i is s dw dwar arfed d by by f foss ssil fuel i incumbe bents. ts.

The Ch Challe allenge ge: Huge public affairs gap

Sources: https://www.statista.com/statistics/257364/top-lobbying-industries-in-the-us/; https://www.forbes.com/sites/niallmccarthy/2019/03/25/oil- and-gas-giants-spend-millions-lobbying-to-block-climate-change-policies-infographic/#3bebafdb7c4f

Wind energy faces a fossil fuel industry prepared to spend hundreds s of m millio illions s of d dolla llars s in the form of donations and lobbying.

• Each year, the top five publicly owned Oil and Gas

companies spend more than US$200 million on lobbying designed to influence climate-related policy.

• Campaigns commonly focus on low-carbon commitments,

position corporate materials/leadership as climate expertise and use misdirection to avoid commitments.

Inves estmen ent f for a a sus ustai ainabl able an e and d res esilien ent f fut utur ure

• Investment in critical infrastructure

(power systems, grid)

• Investment criteria - ‘No Harm’

principle and evidence-based decision-making

• Reporting requirements in line with

TCFD recommendations

• Scale up financing and stem capital

flight for emerging markets

• Economic output of renewables versus

fossil fuels

An An e enablin ling e envir iron

• nment for
• r

clean ean en ener ergy gy

• Fit-for-purpose regulation
• Secure existing/awarded projects

and auction processes

• Removal of barriers for corporate end-

users

• Net-zero commitments, carbon

budgets, carbon pricing, science- based approaches for governments

• Decarbonisation of all economic

sectors through electrification

Empo power ermen ent o

• f peo

peopl ple e to dr drive e the en e ener ergy gy t tran ansition

• Direct and indirect job creation
• Reskill workers from fossil fuels
• “Shovel-ready” wind projects as a

solution for near-term job dislocation and disruption

• Commitment to a just and inclusive

energy transition

• Health and safety
• Young generations as key

stakeholders of the green economic recovery

1 2 3

GWEC’s WEC’s Indus dustr try S y State tatement – ke key pi y pillars llars

Early Policy Movement in the COVID-19 Context

• USA:

A: American Wind Energy Association is working with the government to ask for an extension of PTC, and individual states setting ambitious RE targets

• Poland: Polish Wind Energy Association (PWEA) has urged the Polish government to pass an emergency

law allowing onshore wind farms to ask for waivers to delay completion of their projects by 1 2 months from earlier contracted deadlines.

• Vie

ietn tnam: Extension of FiT for wind being recommended by Ministry of Industry & Trade, paving the way for potential auction

• India

ia: Force Majeure declaration in support of renewable energy industry continuity and growth, liquidity booster package aiming to help the power sector (Distribution companies) and India growing its manufacturing capacity as export hub to counter China’s dominance

• Green Economic Recovery being planned in South

uth K Korea and Chile ile

Grové Steyn

Managing Director: Meridian Economics

The energy sector can provide a large green stimulus to lead SA’s economic recovery

• Much of Eskom’s generation capacity needs to be retired in the foreseeable future.
• The most economic power system development path now consists primarily of renewable energy, with

gas power and battery backup (DMRE: IRP2019; CSIR).

• New renewables are now increasingly cheaper than continued operation of Eskom’s more expensive

coal fired power stations.

• These circumstances create an opportunity for a large, sustained, mostly private sector financed,

investment programme.

• This includes small scale projects, embedded generation, self supply, third party supplies, utility scale

independent power producers and possibly Eskom.

• In turn creates opportunity for:
• value chain localisation, reindustrialisation, and large scale job creation in manufacturing, services,

construction, operations and maintenance.

• much greater participation in the energy sector for previously disadvantaged groups.
• roll-out of a Just Transition programme for affected power station and coal workers.
• large scale Enterprise Development (ED) and Social and Economic Development (SED) project spend

associated with REIPPP projects.

We have a large opportunity to trigger a sustained investment programme greater than that envisaged in the IRP 2019

1 000 2 000 3 000 4 000 5 000 6 000 7 000 8 000 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040

Annual Capacity installed (MW) IRP 2019 Solar PV Wind

By accelerating the rollout of renewable energy

1 000 2 000 3 000 4 000 5 000 6 000 7 000 8 000 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040

Annual Capacity installed (MW) Moderately accelerated build program Solar PV Wind

1 000 2 000 3 000 4 000 5 000 6 000 7 000 8 000 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040

Annual Capacity installed (MW) Aggressively accelerated build program Solar PV Wind Meridian Economics, CSIR (forthcoming) “Power Sector Ambitions Study”

By accelerating the rollout renewable energy aggressively

• Grid Connection Capacity

Assessment shows constrained capacity in areas of project interest (e.g. Northern Cape)

• But lots of available capacity in

Mpumalanga, Limpopo and Free- Sate

• This may require a front-loaded

solar program in the immediate- term due to favourable solar resources and excess grid capacity in Mpumalanga, Free-State, North- West and Limpopo, while capacity is created and transmission lines strengthened to transport power from other renewable projects e.g. in Western and Eastern Cape

Grid constraints imply that a more solar heavy programme is required in the early years

Meridian Economics, CSIR (forthcoming) “Power Sector Ambitions Study”

The full capital cost of:

• the required pollution

control retrofits; and

• refurbishments

to enable full-life operation for many coal units is not taken into account here.

Modest RE industrialisation program Aggressive RE industrialisation program IRP 2019 (RE build constrained to 2050) IRP 2019 (Unconstrained post 2030) Aggressive RE industrialisation program & All Coal

• ff by 2040.

70.0 71.0 72.0 73.0 74.0 75.0 76.0 77.0 78.0 79.0 80.0 81.0 1 500 2 000 2 500 3 000 3 500 4 000 4 500 5 000

Levelised cost (c/kWh) 2020 - 2050

Emissions (Mt) 2020 - 2050

Levelised Cost vs CO2 Emissions

Unconstrained with Reserve Margin requirement Practical RE build programs

The full capital cost of:

• the required pollution

control retrofits; and

• refurbishments

to enable full-life operation for many coal units is not taken into account here.

With substantial climate benefits but no additional costs to the economy in raised electricity costs

Meridian Economics, CSIR (forthcoming) “Power Sector Ambitions Study”

The full capital cost of:

• the required pollution

control retrofits; and

• refurbishments

to enable full-life operation for many coal units is not taken into account here.

Modest RE industrialisation program Aggressive RE industrialisation program IRP 2019 (RE build constrained to 2050) IRP 2019 (Unconstrained post 2030) Aggressive RE industrialisation program & All Coal

• ff by 2040.

0.0 10.0 20.0 30.0 40.0 50.0 60.0 70.0 80.0 90.0 1 500 2 000 2 500 3 000 3 500 4 000 4 500 5 000

Levelised cost (c/kWh) 2020 - 2050

Emissions (Mt) 2020 - 2050

Levelised Cost vs CO2 Emissions

Unconstrained with Reserve Margin requirement Practical RE build programs

The full capital cost of:

• the required pollution

control retrofits; and

• refurbishments

to enable full-life operation for many coal units is not taken into account here.

With substantial climate benefits but no additional costs to the economy in raised electricity costs

10 000 000 20 000 000 30 000 000 40 000 000 50 000 000 60 000 000 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040

Annual Investment (2019 Rands '000) IRP 2019 Solar PV Wind R246.9Bn

And significant additional capital invested in the next 10 years and beyond

10 000 000 20 000 000 30 000 000 40 000 000 50 000 000 60 000 000 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040

Annual Investment (2019 Rands '000) Moderately accelerated build program Solar PV Wind R344.1Bn

And significant additional capital invested in the next 10 years and beyond

10 000 000 20 000 000 30 000 000 40 000 000 50 000 000 60 000 000 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040

Annual Investment (2019 Rands '000) Aggressively accelerated build program Solar PV Wind R452.7Bn

And significant additional capital invested in the next 10 years and beyond

10 000 20 000 30 000 40 000 50 000 60 000 70 000 80 000 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040

IRP (2019) RE jobs per year till 2040

Operation Construction

Meridian Economics, CSIR (forthcoming) “Power Sector Ambitions Study”; Employment factors drawn from Hartley et al (2019) “Co-benefits study: future skills and job creation through renewable energy in South Africa” and Eberhard and Naude (2017) analysis of IPP Office Data in “The South African Renewable Energy IPP Procurement Programme”

Plus the ability to create thousands of additional jobs

Meridian Economics, CSIR (forthcoming) “Power Sector Ambitions Study”; Employment factors drawn from Hartley et al (2019) “Co-benefits study: future skills and job creation through renewable energy in South Africa” and Eberhard and Naude (2017) analysis of IPP Office Data in “The South African Renewable Energy IPP Procurement Programme”

10 000 20 000 30 000 40 000 50 000 60 000 70 000 80 000 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040

Moderately accelerated build programme: RE jobs per year till 2040

Operation Construction

Plus the ability to create thousands of additional jobs

Meridian Economics, CSIR (forthcoming) “Power Sector Ambitions Study”; Employment factors drawn from Hartley et al (2019) “Co-benefits study: future skills and job creation through renewable energy in South Africa” and Eberhard and Naude (2017) analysis of IPP Office Data in “The South African Renewable Energy IPP Procurement Programme”

10 000 20 000 30 000 40 000 50 000 60 000 70 000 80 000 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040

Aggressively accelerated build programme: RE jobs per year till 2040

Operation Construction

Plus the ability to create thousands of additional jobs

0% 50% 100% 150% 200% 250% 300%

2 0 0 5 2 0 0 6 2 0 0 7 2 0 0 8 2 0 0 9 2 0 1 0 2 0 1 1 2 0 1 2 2 0 1 3 2 0 1 4 2 0 1 5 2 0 1 6 2 0 1 7 2 0 1 8 2 0 1 9 2 0 2 0 2 0 2 1 2 0 2 2 2 0 2 3 2 0 2 4 2 0 2 5 2 0 2 6 2 0 2 7 2 0 2 8 2 0 2 9 2 0 3 0 2 0 3 1 2 0 3 2 2 0 3 3 2 0 3 4 2 0 3 5 2 0 3 6 2 0 3 7 2 0 3 8 2 0 3 9 2 0 4 0

YEAR

TOTAL RENEWABLES CAPACITY RELATIVE TO SYSTEM PEAK LOAD

Germany Spain Ireland United Kingdom Italy China Australia Japan India Brazil South Africa Aggressively accelerated build program Moderately accelerated build program IRP 2019

Sources: CSIR; www.ourworldindata.org; http://www.bp.com/statisticalreview; Meridian Economics.

Allowing South Africa to catch up with the rest of the world, where renewable penetration far exceeds our own

This critical opportunity is now recognized by many local and international commentators

The additional carbon savings could form the basis for a large concessionary climate finance transaction – a Just Transition Transaction consisting of three legs: 1) The South African Government and Eskom will commit to delivering additional, measurable CO2 reductions over and above the current policy trajectory (enabled by the large green industrialisation programme); In return: 2) Eskom’s access to its traditional funding sources (DFIs, capital markets, banks, etc.) will be restored; while 3) Affected labour and communities will benefit from a Just Transition programme backed by the net proceeds from the transaction, and the crowding in of new energy projects and other infrastructure in Mpumalanga and beyond. Eskom Central Buyer (Transmission Group) could also make a margin on utility scale renewable energy that will replace its coal power.

The green stimulus could also be levered to benefit Eskom’s finances and workers

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Lack of political commitment and policy certainty Regulatory restrictions in the electricity sector Grid capacity issues Local content requirements Domestic skills and construction capabilities Local capital pools Environmental regulation Technical integration of renewable energy (grid… BEE criteria Logistics including port infrastructure and transport Social resistance Municipal/community capacity for engaging in…

CONSTRAINTS ON RENEWABLE ENERGY ROLLOUT IN SOUTH AFRICA

% of total (19) experts and developers who ranked each as a constraint on industry growth (Meridian Economics analysis, 2020) Top 3 constraints

• n industry growth

can all be addressed through government intervention and alignment of planning efforts

Renewables developers face a range of mostly policy related constraints

• SA needs to drastically reduce the role of central planning, regulation and delivery, to

enable thousands of economic agents to respond nimbly to investment opportunities in a competitive market.

• Drastically increase the level of projects that are completely deregulated (NERSA), up to 50MW.
• Resolve large-scale regulatory disfunction
• Conduct independent study of NERSA’s role and performance; and
• Take steps to improve its independence, capacity, governance, and accountability (new

appointment mechanism; regular independent reviews; appeals mechanism, etc.).

• Improve coordination between environmental and land use approvals for renewables projects.
• Establish a public agency to support developers by cutting through red tape; and who should be

measured the investment outcomes.

• Resolve the fundamental conflicts of interest that have stymied the development of the

sector:

• Industry structure: Separate natural monopoly functions from power generation. Establish the

national transmission grid (incl. the system operator, power system planner and central buyer) as a separate SOE that is independent from all generators (See DPE’s “Eskom Roadmap” policy document and NT’s “Contribution towards a growth agenda for the South African economy”)

• Government structure: Separate minerals (coal) policy function from energy policy function.
• Establish green industrialisation as the centre piece of our industrial policy.

A large green stimulus can only be achieved with fundamental policy, regulatory and market reforms

• A broad range of analysts agree that a large, renewable energy led, green stimulus is
• ne of the few substantial recovery opportunities available to South Africa.
• It does not require fiscal resources.
• But, it will require fundamental policy and regulatory reform.
• Initial short-term reforms (change ministerial regulations) can be implemented in

months to initiate the process and initiate the ramp up of capital expenditure in 2021;

• But, zero-based policy, regulatory and market design is required to achieve the main

benefits for South Africa.

• South Africa can also leverage the additional GHG mitigation with international climate

funders to obtain large-scale concessionary funding for Eskom and a Just Transition for workers.

• While there will be other challenges to achieving these large economic benefits for the

livelihoods of South Africans, the main obstacles to success lie within our politics and the vision of our policy makers.

Conclusions

Polling

Marubini Raphulu

CEO: Hulisani Limited

• Change happens quickly and is

enforced, we need to adapt

• Essential services redefined
• New jobs and skills in high

demand

• Innovation in manufacturing and

services brought into sharp focus.

• A greater focus on energy

efficiency, ESG and GRI reporting

A whole New World A whole New World

A whole New World A whole New World

A whole New World A whole New World A whole New World

A whole New World A whole New World

• Logistics stopped almost overnight
• Are established supply chains sufficiently

diversified.

• What should we manufacture locally and

should we designate?

• Is price everything?
• The case for Local content and procurement -

we can produce steel wind towers in South Africa, for example, does it still make sense to import them? What else can we produce?

• Boost local manufacturing and supply to boost

resilience of African economies

• Create potential future untapped markets.

Global supply shocks

• Covid has exposed several deep fault

lines in our society

• Health care
• Clean air and environmental
• Social impact/Social License
• Energy sector job gains exceed losses

in every region worldwide

Inequality kills – The case for a Just Transition

Inequality kills – The case for a Just Transition

• Discussions on energy must be

more holistic

• Look at the complete value chain –

with reference to the Integrated Energy Plan and National Development plan among others

• Energy security and economic

development are linked

• Job gains and transforming energy

investments are the future and will be central to rebuilding economies

• Energy is not only for

electrification

Energy as a catalyst for growth – not in isolation

Energy as a catalyst for growth – not in isolation

• Dr. Tobias Bischof-Niemz

Head of Department Business Development: ENERTRAG

Q&A Hosted by: Ntombifuthi Ntuli

CEO: South African Wind Energy Association (SAWEA)